Oil falls 3% on recession concerns
Reuters
First Posted 04:25:00 10/15/2008
Filed Under: Economy, Business & Finance
NEW YORK — (UPDATE) Oil prices fell more than three percent on Tuesday as concerns the global economy could slip into recession and drag down demand outweighed optimism over the bank bailout plans.
US crude settled $2.56 lower at $78.63 a barrel after hitting $84.83 earlier. London Brent crude ended $2.93 lower at $74.53 a barrel.
Slumping demand in the United States and other big consuming nations and the mounting financial crisis have dragged crude off record peaks over $147 a barrel, hit in July.
The United States announced plans to take equity stakes worth up to $250 billion in financial institutions after European powers agreed to recapitalize their banks on Monday.
The Dow Jones industrial average .fell as fears the actions would not prevent the global economy from slipping into recession, after registering its biggest one-day point gain on Monday.
"People are worried about the economy right now, they are worried that demand is going to be down," said Mark Waggoner, president of Excel Futures. "But I think we are still going to bounce back and two weeks from now, we may see [crude oil] prices off to the races again. For one thing, demand in China still continues to rise."
No. 2 oil consumer China saw September crude imports rise 10 percent from a year earlier, clocking a second month of double-digit growth, as the country's majors made a limited restock amid signs of weakening demand.
Producer group OPEC has called an emergency meeting for Nov. 18 to discuss the crisis and its effects on oil markets, with some members calling for production levels to be reduced.
Analysts say the prospect of a global recession could force OPEC members to be more tolerant of cheaper oil, although the threat of swelling stocks could force an output cut by early next year.
Some support for prices came on news OPEC seaborne oil exports, excluding Angola and Ecuador, fell 600,000 barrels per day in September, Lloyd's Marine Intelligence Unit said Tuesday.
Oil traders are also awaiting weekly US inventory data on Thursday, with analysts forecasting increases of 1.9 million barrels in crude stocks, 600,000 barrels in distillates, and 2.9 million barrels in gasoline inventories.
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